Prominent cryptocurrency investment firm Grayscale has submitted a new application to the U.S. Securities and Exchange Commission (SEC) seeking approval for a spot Bitcoin exchange-traded fund (ETF). This move follows a recent D.C. circuit court decision that prompted a review of Grayscale’s application.

On October 19, Grayscale filed an S-3 form registration statement with the SEC with the intention of listing Grayscale Bitcoin Trust shares on the New York Stock Exchange (NYSE) Arca under the ticker symbol GBTC. This step is in line with Grayscale’s ongoing efforts to transform its Grayscale Bitcoin Trust into a spot Bitcoin ETF, as mentioned in an official statement by the firm.

Commitment to Collaboration

Grayscale expressed its unwavering commitment to collaborating with the SEC for the benefit of GBTC’s investors. The company acknowledged the regulatory nuances surrounding the transition and outlined that the latest S-3 registration statement is a condensed version of a standard Form S-1 statement typically used for initial public offerings of equity securities registered under the Securities Act.

GBTC’s Eligibility for Form S-3

Grayscale clarified that GBTC is eligible to employ Form S-3, a more concise filing that references SEC disclosures and reports. This eligibility arises from GBTC’s registration under the Securities Exchange Act of 1934 since January 2020 and its compliance with other form requirements.

The firm highlighted that once NYSE Arca’s 19b-4 application is approved and the SEC declares the Form S-3 as effective, Grayscale will be able to convert GBTC into an ETF and issue shares on a registered basis. Grayscale underlined its readiness to operate as an ETF upon obtaining the necessary regulatory approvals, expressing eagerness to collaborate efficiently with the SEC on these matters on behalf of GBTC’s investors.

As the United States inflation data continues to outperform expectations, Bitcoin is struggling to maintain the crucial $26,800 support level, just ahead of the Wall Street opening on October 12.

CPI Data Surprises Market

CPI data for September, reported by the U.S. Bureau of Labor Statistics, revealed a year-on-year increase of 3.7%, slightly surpassing the anticipated 3.6%. Excluding food and energy, the figure stood at 4.1%, in line with forecasts. This persistent inflation trend has added to the growing concerns in the market.

Fed target rate probabilities chart. Source: CME Group

The current situation has raised questions about the Federal Reserve’s monetary policy. With the Producer Price Index (PPI) and Personal Consumption Expenditures (PCE) both indicating rising inflation, the ability of the Fed to cut interest rates in the near future is under scrutiny. The notion of “higher for longer” interest rates in the U.S. could lead to increased pressure on risk assets, including cryptocurrencies.

Fed’s Next Moves

Despite CPI data exceeding expectations, the likelihood of the Federal Reserve raising rates further at the upcoming Federal Open Market Committee (FOMC) meeting on November 1 remains minimal at just 7.4%, according to CME Group’s FedWatch Tool.

BTC/USD 1-hour chart. Source: TradingView

Bitcoin market participants are cautious, with little optimism for an immediate upside. Traders are closely monitoring the $26,800 level, hoping for it to become a solid support zone. Material Indicators suggests limited bid liquidity beyond $24,750, a key level from the past two quarters.

Market Sentiment

Market sentiment leans toward a bearish outlook for Bitcoin. The prevailing sentiment is that macroeconomic factors, alongside geopolitical tensions, make it challenging for Bitcoin to experience a significant upward movement. With the “good = bad” equation, as one commentator put it, many are cautious about Bitcoin’s prospects in the short term.

As Bitcoin navigates these complex market dynamics, traders are eyeing the key support levels around 25-26k and the resistance levels at 29-30k as critical indicators to determine the cryptocurrency’s next trend. The downward trajectory of Bitcoin and other major altcoins like Ether continues despite various potential bullish factors in Q4, according to trading firm QCP Capital.

An amended filing for the joint spot Bitcoin exchange-traded fund (ETF) by ARK Invest and 21Shares has emerged as a promising sign of progress toward approval. This updated filing, submitted on October 11 to the Securities and Exchange Commission (SEC), includes additional details regarding the proposed Bitcoin ETF’s operational aspects, addressing concerns raised by the SEC.

Addressing SEC Concerns

Bloomberg’s senior ETF analyst, Eric Balchunas, emphasized that the changes in the filing could be seen as a direct response to concerns expressed by the SEC. These adjustments, according to Balchunas, indicate that ARK has taken into account the SEC’s comments and has effectively addressed them, effectively putting the ball back in the SEC’s court. Balchunas views this as a positive sign of solid progress toward ETF approval.

Balchunas noted that the changes made to the filing are spread throughout, resulting in a document that is five pages longer. He also mentioned that none of the comments raised by the SEC were particularly new or insurmountable.

This is also new (and again something we heard SEC asked about): “The Trust’s assets with the Custodian are held in segregated accounts on the bitcoin blockchain, commonly referred to as “wallets,” and are therefore not commingled with corporate or other customer assets.” pic.twitter.com/57TmnNi1lE

— Eric Balchunas (@EricBalchunas) October 11, 2023

One noteworthy change is ARK’s acknowledgment that the fund’s net asset value (NAV) calculations do not align with Generally Accepted Accounting Principles (GAAP), which is a standard used by the SEC.

Clarity on Asset Custody

The amended filing provides clarity about the custody of the ETF‘s assets, which are held by Coinbase Custody. It explicitly states that these assets are kept in “segregated accounts” and are not commingled with corporate or other customer assets. This clarification suggests effective communication between ARK and the SEC about addressing the regulator’s concerns.

Positive Signs for Future Approval

Still chuckling a bit at this “electricity usage” risk factor. Ark couldn’t even be bothered to put in a coherent header summary or more than a couple short sentences. You know the convo w/ the SEC was like “oh yea, good call Mr. SEC attorney, this is definitely material /s” https://t.co/unIArFDKl8

— Scott Johnsson (@SGJohnsson) October 12, 2023

According to Scott Johnsson, a general partner at Van Buren Capital, another noteworthy addition in the amended filing is a comment related to Bitcoin’s potential use for illegal purposes and its environmental impact due to mining. The filing acknowledges that these factors could impact the ETF‘s value. Johnsson’s assessment of ARK’s amendments indicates that the agency does not appear to be creating unnecessary roadblocks through the disclosure review process.